Capitalism and socialism are just words

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published 11 November 2019

As the field of Democratic Party presidential contenders narrows, we may well find ourselves stuck in a big ideas debate over the merits of "capitalism" versus "socialism." Of the three front-runners, Sen. Elizabeth Warren (D-Mass.) famously called herself "a capitalist to my bones," while Sen. Bernie Sanders (I-Vt.) identifies as a democratic socialist. Former Vice President Joe Biden seems to be... whatever will keep the big money donors rolling in. Meanwhile, a lot of centrists, liberals and leftists are drawing up battle lines depending on whose label they prefer.

But "socialism" and "capitalism" are just words. And the way they get used in everyday debate covers a vast and diverse array of economic arrangements. At the edges, they bleed into one another to the point you can't tell where one ends and one begins.

For instance, consider the way your average Fox News pundit slings the word "socialist" at anyone to the left of West Virginia Senator Joe Manchin. Or how the establishments of both parties, as well as the American billionaire class, are hell-bent against Warren becoming president. These are the defenders of America's status quo, which is understood to be capitalism. But whatever Warren means by the term is clearly something they want no part of. Meanwhile, if you actually pick through Sanders' definition of democratic socialism, it's basically some combination of Franklin Roosevelt's politics plus Nordic social democracy — two things lots of people traditionally understood as falling under the capitalism umbrella.

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The difference between, say, giving markets "better rules" — as Warren says she wants to do — and "interfering with" or "disrupting" markets — as Warren and Sanders' critics say they will do — is entirely in the eye of the beholder. That's because markets themselves are social constructs all the way down. They simply don't exist before government, or whatever your local social authority is, lays down some rules giving them form and structure.

In that spirit, allow me to sketch what is, I think, something close to my own ideal economy: The private sector is made up of many small-to-medium sized firms, all run and owned by the workers who labor within them. Wages are determined through sectoral bargaining. If stocks still exist at all, they confer no voting rights, and are simply an alternative means of raising finance. Financial markets are modest and straightforward affairs geared solely toward facilitating real investment. Wall Street and the big banks are no more, and loans for private business are created through a national network of public banks and credit unions. Major conglomerates, corporate monopolies, and big tech platforms have all been smashed by antitrust law, nationalized, or tamed as tightly regulated public utilities.

Companies are still permitted to go under if they can't compete, and banks are still allowed to fail if they make bad bets. But the government stands ready to ensure continued full employment, through a national job guarantee, public investment, and industrial policy as needed. The government also provides (not necessarily exclusively) health care, education, child care, sweeping public transit, public housing, basic utilities, retirement income, a vast suite of cash welfare benefits, generous research and development funding, and community development grants. Steeply progressive taxes put a hard ceiling on how much income one person can bring home, and how much wealth they can accumulate.

Those aforementioned Fox News pundits, party establishments, and Bloomberg-ian billionaires, I'm sure, would all say my vision is socialism — and they'd consider it some mix of absurd and horrifying. On the flip side, markets and competition and the iterative trial-and-error that is capitalism's best feature still play big roles in this scenario. Companies that are not competitive still go bust; banks and financial institutions still suffer losses if they make bad investment decisions.

Self-identified socialists have long said that markets would still play a role in their preferred societies — but exactly what role tends to be vague. One of the more useful thinkers on this score is Karl Polanyi, because he was very concrete and specific: get land (housing), labor (employment), and money itself (i.e. credit and financing) out of the market context. I think you could throw stuff like health care and education and transit onto that list as well. But the point is, if we say markets will play some limited role — as opposed to gobbling up all of society like they do now — then we're not really saying anything until we start laying down specifics. All the real work is in the nitty gritty of this question.

I've been reading Matt Stoller’s Goliath, about American politics' long battle against monopolies — which we are currently losing badly. One thing he touches on is how much of the post-war U.S. left became infatuated with bigness: organizing an economy of shared abundance is easier when you have a few giant unions and giant corporate powerhouses to deal with, rather than a vast system of modestly-sized yeoman businesses and worker organizations. The problem is that, historically speaking, big central planning has tended to come packaged with authoritarianism and repression. See modern China or Soviet Russia — or, as Stoller notes, the historical linkages between monopoly cartels and fascism. Friedrich Hayek was onto something in that regard.

America's current irony is that, in its efforts to avoid socialist authoritarianism, it's delivered itself into the hands of capitalist authoritarianism. In both cases, the mistake is the same: the refusal to grapple with the structure of power. And I hope one thing my little scenario gets across is how a society that embodies socialist values could also be a decentralized one, with lots of little power centers engaged in a democratic give-and-take with one another, instead of a few big power centers running everything.

These are the questions that determine whether you've built democracy and egalitarianism into the structure of the economy itself, or whether you merely have a democratic government that hopefully remains democratic as it runs a top-down economy. I think it's clear that you can't really achieve the former without significant reliance on competitive markets in some way. At the same time, modern America's vacuous faith in "unfettered" markets as the solution to all social problems ultimately ends with neither democratic government nor democratic economics.